Federal Appeals Court Upholds Order to Release Frozen Federal Funds

In a significant ruling, the 1st U.S. Circuit Court of Appeals has refused to halt a lower court’s order demanding the Trump administration to unfreeze billions in federal grants and loans, amid ongoing legal battles over the administration’s spending policies.

On February 11, 2025, the Boston-based 1st U.S. Circuit Court of Appeals rejected an emergency appeal by the Trump administration, which sought to overturn a ruling by U.S. District Court Judge John McConnell in Rhode Island. McConnell’s decision mandated the release of federal grants and loans that had been frozen following a controversial memo from the administration aiming to halt all federal funding.

The Trump administration’s attempt to freeze federal grants and loans, which were valued at trillions of dollars, led to widespread chaos and legal challenges from nearly two dozen states. Despite rescinding the initial memo, the administration failed to fully restore all federal funding, prompting Judge McConnell to intervene.

The Justice Department labeled the lower court’s order as ‘intolerable judicial overreach,’ arguing against the sweeping requirement to keep all federal grants and loans flowing. However, the appeals court, while expecting a swift clarification from the lower court judge, upheld the order to release the funds.

This ruling underscores the ongoing tension between the judiciary and the executive branch over the administration’s fiscal policies, with states and various stakeholders closely monitoring the outcome as it directly impacts their access to critical federal resources.